During 2012, ABC company finished construction of a new warehouse



1. During 2012, ABC company finished construction of a new warehouse. Construction began on 1/1/2011. The cost of the new warehouse was $3,000,000 with the cost incurred evenly throughout the construction. The following information is provided:

ABC Co. incremental interest rate is 10%
Actual interest rate during 2012 was $135,000
The average accumulated expenditures was $1,500,000

A.How much interest should be calculated?
B.What is the entry to capitalize the interest?

2.During 2012 XYZ company began and completed a small warehouse.Construction on the warehouse began on 1/2/2012.Expenditures were made as follows:
January 2 $1,000,000
March 1 $900,000
July 1 $400,000
Oct 1 $800,000
XYZ financed the project by issuing $1,000,000 in stock at the beginning of 2012 and borrowed $1,200,000 from the bank at an interest rate of 8%. In addition the company had the following debt:$1,000,000, interest rate of 9% borrowed in 2010,$2,000,000,11% note borrowed in 2009.Both of the debts are due in 2015.

A.Calculated the 2012 Weighted Average Accumulated Expenditures
B.How much is avoidable interest
C.How much is actual interest
D.Make the entry capitalizing the interest in 2012.


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